How will Brexit affect UK Franchising?

Last year, on the 23rd of June, the majority of UK voters took it upon themselves to declare that they no longer want to be a part of Europe and decided that Brexit was the future which would provide the UK with the best opportunity to flourish. It is still too early to say whether this decision was the best route for the UK but nevertheless the decision has been made and UK franchises need to start analysing the possible challenges ahead.

As no deal has been made on exactly how we shall leave the EU and what the arrangements are going to be, the future it currently uncertain. That being said, some areas can anticipate change and franchisors need to start making an action plan.

Fortunately, the EU hasn’t had a great deal of involvement in English Law in terms of franchising as it is mainly base on Common Law. The UK doesn’t have any specific franchise laws, registration or disclose rules which do occur for some European countries. This means that UK franchises are less likely to be affected by leaving when we ultimately trigger Article 50 and leave the European Union.

Customer Confidence

We have seen a healthy growth in the B2B sector for franchising and franchising still remains very popular within the UK, but the majority of franchises still operate in the B2C sector, which can be seriously affected by customer confidence.

According to the Office for National Statistics, in August 2017, the quantity bough in the retail sales industry increased by 1% compared with July 2017. We have seen this growth for some time now as, in August 2016, we saw the quantity bough increase by 2.4%. This demonstrates that currently customer confidence hasn’t seriously impacted sales in the B2C market and we are still seeing underlying growth in sales volumes, however, with Brexit ’on hold’ for approximately 2 years, we need to prepare for this to change.

Franchise Supply Chain

One of the major discussions around Brexit which will affect many businesses and franchises in the UK, is what terms will be decided upon around the free movement of goods between the UK and Europe. Import duties are currently expected to be imposed for UK products and those franchises that source products/services from Europe can expect to be paying more for the same as well. This means any franchises that currently operate in this model need to start looking for alternatives. With the end of this agreement, it may lead to non-EU countries being able to offer better packages at a cheaper rate than European countries after the duties are applied.

Immigration & Staffing

One of the key influencers which led many to the polls to vote to leave the European Union was the current rules around immigration and free movement within Europe, with many UK citizens wanting a tighter control. This may not affect all franchises but, those that source employees through the free movement of EU workers, will find that this may have a serious impact and should start writing contingency plans to combat the likely removal of this law.

Sterling Devaluation

On the 23rd of June 2016, the GBP was worth 1.3 EUR whereas, after the decision for Brexit was made, the value of sterling has plummeted. With all currency and exchange rates, it has had its peaks and troughs, but overall at the time of writing this article the value was 1 GBP = 1.11 EUR. This devaluation of the sterling does bring its benefits to certain businesses, such as those that mainly export, as they will find their prices become more competitive, however it also contains a lot of negative aspects.

A weak-valued pound means franchises that import goods will see cost rise, this may be a serious impact on food franchises, where many import from cheaper European sources. It will also increase inflation in cost for items such as fuel which many franchises will utilise in some aspect.

It’s impossible to say exactly how much a lower sterling value will impact all businesses or franchises as it may be a strength for particular industries but overall a lower value is seen as a negative trend for UK business overall and franchises should assess their particular market and make adjustments to their forecast to account for this.

With Brexit bringing a level of uncertainty for British businesses it may seem daunting to start a new business, however with the higher success chance franchises have, perhaps starting a franchise is the best route in uncertain times. If you think franchising is the way to go then take a look at some of our top UK franchise opportunities